The correct option is 1 only
Explanation
In macroeconomics, variables are classified as either stocks or flows based on the time dimension of their measurement. A stock variable is measured at a specific point in time (a snapshot), whereas a flow variable is measured over a specific period of time (an interval).
Statement 1 is Correct:
Income and profits are classic examples of flow variables. One does not possess income at a specific second; rather, income is earned over a period (e.g., monthly salary, annual profit). Therefore, they have a time dimension (per unit of time).
Statement 2 is Incorrect:
Capital goods (such as machinery, buildings, and equipment) represent the accumulated assets of an economy or firm at a particular moment. Therefore, capital is a stock concept, measured at a specific point in time (e.g., capital stock as of March 31st). It is not a flow variable.
Statement 3 is Incorrect:
The change in the stock of capital is known as investment (or capital formation). Since this change occurs over a duration (between two points in time), it is a flow variable. For example, the difference between the capital stock at the beginning of the year and the end of the year is the net investment made during that year.
Key Takeaway:
Stock refers to the quantity of a variable at a specific point in time (e.g., Wealth, Capital, Money Supply). Flow refers to the quantity measured over a period (e.g., Income, Investment, GDP, Depreciation). The change in a stock variable over time is a flow.